What is the risk-free interest rate?
What will be an ideal response?
The risk-free rate of return is the term often used for the rate of return on short-term government bonds. Since these bonds are essentially risk free, the rate of return earned on the bonds represents compensation for only the time preference.
This interest rate, however, is not determined solely by investors’ time preference. The Federal Reserve has the ability to raise and lower the rate as it sees fit through sales and purchases of bonds (also known as open market operations).
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If Massage R Us, a spa chain specializing in massage, offers a lower price for a massage to senior citizens, this is an example of ________.
A) second-degree price discrimination B) first-degree price discrimination C) third-degree price discrimination D) zero-degree price discrimination
Which of the following is true if a market is in equilibrium?
a. price will be rising b. price will be falling c. quantity demanded is greater than quantity supplied d. quantity demanded is equal to quantity supplied e. quantity demanded is less than quantity supplied
When the U.S. real interest rate rises, foreigners will want to purchase
a. more U.S. assets so U.S. net capital outflow rises. b. more U.S. assets so U.S. net capital outflow falls. c. less U.S. assets so U.S. net capital outflow rises. d. less U.S. assets so U.S. net capital outflow falls.
Which statement is true?
A. Frank Knight believed that capital is surplus value that has been stolen from the worker. B. Joseph Schumpeter believed that risk-bearing is no part of the entrepreneurial function. C. Karl Marx believed that profits were the capitalist's reward for innovation. D. None of the statements are true.